B-166698, MAY 27, 1969

B-166698, MAY 27, 1969

TO MR. ROBERT J. SCHULLERY:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 15, 1969, REQUESTING OUR DECISION AS TO WHETHER YOU MAY CERTIFY FOR PAYMENT A VOUCHER FOR $243.65 IN FAVOR OF MR. DAVID B. CARMICHAEL, AN EMPLOYEE OF YOUR AGENCY, COVERING RELOCATION EXPENSES INCIDENT TO HIS TRANSFER FROM MIAMI, FLORIDA, TO ATLANTA, GEORGIA, EFFECTIVE SEPTEMBER 8, 1968.

MR. CARMICHAEL PURCHASED A HOME IN COLLEGE PARK, GEORGIA, FOR $25,500; NEGOTIATED TWO LOANS AGGREGATING 90 PERCENT OF THE PURCHASE PRICE, A FIRST MORTGAGE LOAN OF $19,100 AND A SECOND MORTGAGE LOAN OF $3,850, A TOTAL OF $22,950; AND CLAIMED REIMBURSEMENT FOR THE FOLLOWING ITEMS:

FIRST SECOND

ITEM MORTGAGE MORTGAGE TOTAL

---- -------- -------- ----- SERVICE CHARGE $ 114.75

$ 114.75 $ 229.50 TITLE FEE 233.20 107.90 341.10 MORTGAGE TAX 58.50 12.00 70.50 RECORDING FEE

9.00 9.00 18.00

$ 415.45 $ 243.65 $ 659.10

-------- -------- -------- MR. CARMICHAEL WAS REIMBURSED FOR THE EXPENSES OF $415.45 ASSOCIATED WITH THE FIRST MORTGAGE. HOWEVER, HE WAS DENIED REIMBURSEMENT OF THE EXPENSES OF $243.65 ASSOCIATED WITH THE SECOND MORTGAGE SINCE THE CLOSING ATTORNEYS STATED THAT THE COST WOULD NOT HAVE BEEN THE SAME IF MR. CARMICHAEL HAD OBTAINED ONE LOAN INSTEAD OF TWO LOANS. MR. CARMICHAEL STATES HE WAS ADVISED BY A SAVINGS AND LOAN ASSOCIATION THAT ITS CLOSING COSTS FOR A $22,900 LOAN WAS $916 AND RECLAIMS THE $243.65 ADMINISTRATIVELY DISALLOWED.

SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A-56 PROVIDES IN PERTINENT PART AS FOLLOWS:

"* * * FEES FOR LOAN APPLICATIONS, LENDER'S LOAN ORIGINATION, CREDIT REPORTS, MORTGAGE AND TRANSFER TAXES, STATE AND FEDERAL REVENUE STAMPS, AND SIMILAR FEES AND CHARGES, ARE REIMBURSABLE TO THE EXTENT SUCH COSTS ARE CUSTOMARILY PAID BY THE SELLER AT THE LOCATION OF THE OLD OFFICIAL STATION OR BY THE PURCHASER AT THE LOCATION OF THE NEW OFFICIAL STATION, BUT THE SAME TYPES OF COSTS ARE NOT REIMBURSABLE AT BOTH LOCATIONS. * *

FINANCING COSTS MAY BE REIMBURSED TO THE EXTENT THAT THEY DO NOT EXCEED THE CUSTOMARY COSTS IN THE AREA INVOLVED FOR THE TYPE OF FINANCING OBTAINED. SEE B-166322, APRIL 1, 1969. MOREOVER, THE FACT THAT A PURCHASER PAYS TWO SIMILAR FEES IN CONNECTION WITH HIS FINANCING DOES NOT PRECLUDE REIMBURSEMENT OF BOTH IF THEY ARE OTHERWISE ALLOWABLE. SEE B- 166425, APRIL 15, 1969. THEREFORE, WE WOULD NOT OBJECT TO REIMBURSEMENT OF THE EXPENSES INCURRED IN NEGOTIATING THE SECOND MORTGAGE LOAN IF THEY ARE ADMINISTRATIVELY APPROVED AS CUSTOMARILY PAID BY A PURCHASER IN A SECOND MORTGAGE SITUATION AND REASONABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.3B OF CIRCULAR NO. A-56.

THE DETERMINATION OF THE REASONABLENESS OF THE CHARGES MAY NOT BE BASED ON THE $916 CLOSING COSTS FOR A 90 PERCENT LOAN QUOTED TO MR. CARMICHAEL BY A SAVINGS AND LOAN ASSOCIATION SINCE THE COSTS ARE NOT BROKEN DOWN AND MAY INCLUDE COSTS THAT ARE NOT ALLOWABLE. IN CONNECTION WITH CHARGES INCIDENT TO OBTAINING A SECOND MORTGAGE OR A 90 PERCENT LOAN, WE POINT OUT THAT CHARGES ASSESSED TO COMPENSATE THE LENDER FOR THE HIGH RISK INVOLVED ARE NOT REIMBURSABLE. SEE B-164452, JULY 2, 1968, AND B-164117, MAY 16, 1968.

THE VOUCHER, WHICH IS RETURNED HEREWITH, SHOULD BE PROCESSED IN ACCORDANCE WITH THE ABOVE.